The True Cost of Going to University

It feels like just yesterday that I was applying for university.

UCAS deadlines, open days, conversations about courses and careers. Around that same time, tuition fees were rising from £3,000 to £9,000. Suddenly, going to university did not just mean getting a degree. It meant taking on a much bigger loan than students before us ever had to.

Still, we were told not to worry about it.
That we would not really notice the repayments once we started earning.
That future us would be fine.

At 17 or 18, you do not really have the reference points to challenge that. You assume the system has been thought through.

What no one really explained was that this decision, made so early in life, could quietly affect your take-home pay for 30 to 40 years ⏳.

Today, around 65% of students go from sixth form or college straight into university. For most young people, that makes student finance the first serious financial commitment of their lives.

And yet, very little time is spent explaining how student finance actually works.

That is the part I struggle with.

We expect young people to take on tens of thousands of pounds of debt, but we do not clearly explain how repayments are calculated, how long the loan can last, or how it shows up in real life. Not in theory, but in their monthly pay 💸.

When it starts to feel real 💼

Student loans do not work like normal debt.

They do not appear on your credit file. You do not receive monthly bills. You do not decide when to pay. Once you earn above a certain level, repayments are taken automatically from your salary through payroll.

Because of that, it is easy to forget about them until you properly look at your payslip.

That is often when it clicks. For many graduates, it feels less like paying off a loan and more like a mini mortgage on their income 🏠, something that quietly follows them year after year.

The different plans 😅

Another reason student loans are so poorly understood is that there isn’t just one system.

Plan 1, Plan 2, Plan 4 and Plan 5 all work in broadly the same way, with repayments set at 9% of what you earn above a threshold, while postgraduate loans (Plan 3) are repaid at 6% above a separate threshold.

The thresholds vary by plan, but the principle does not. Repayments are based on income before tax and taken automatically from your pay.

This is why, with student loans, how much you earn often matters more than how much you borrowed📈.

What does change significantly is how long the loan can stay with you. For example, Plan 1 is written off after 25 years, while Plan 5 lasts 40. A long commitment to agree to at 17 or 18.

Where interest actually changes the outcome 📊

Interest is where outcomes start to diverge.

Older plans such as Plan 1 and Plan 4, and the newest plan, Plan 5, charge interest broadly in line with inflation. Under Plan 2, interest is linked to inflation and can be up to 3% higher than inflation, depending on your income.

📦 What the numbers actually look like

Assume a £50,000 Plan 2 loan and use the current Plan 2 threshold of £28,470. Repayments are 9% of income above the threshold.

If you earn £35,000, you repay about £49 a month.
If you earn £50,000, you repay about £161 a month.
If you earn £100,000, you repay about £536 a month.

At lower incomes, repayments can be small enough that many people never clear the loan and whatever remains is written off at the end of the term.

At higher incomes, the picture flips. If you’re likely to pay the loan off in full, interest is not written off, it directly increases the total amount you personally repay.

Same £50,000 loan. Very different outcomes.

Put simply📌

Below an income of roughly £40,000, many people never clear the loan and repayments tend to be relatively low overall.

Between roughly £45,000 and £60,000, many people repay a large amount but still do not clear the loan before the write-off point. This is the grey zone.

Above roughly £70,000 to £80,000, people are increasingly likely to clear the loan, and interest becomes a real cost. In these cases, it may be worth considering early repayment, assuming you can afford it and after other priorities are covered.

(In most cases, student loans are not a priority debt. They do not affect your credit score, repayments are income-linked, and there is no requirement to clear the balance quickly.)

This is not anti university 🌍

This isn’t an argument against university.

Education remains one of the most powerful ways to improve your social and economic position, and compared with many other countries, the UK system still offers important protections through income-linked repayments and loan write-offs.

But the cost has changed.

University in the UK was once free, or at least affordable enough to work through or pay off relatively quickly after graduating. That is no longer the reality, and the decision now carries much longer-term financial consequences.

University is also a business decision 💼💰

Going to university today is not just an educational decision.

It is a career decision.

It is a financial decision.

And it is a decision that affects your long-term cash flow.

That does not make university a bad choice. It makes it a choice that deserves to be properly understood.

University does not have to be the only path, and education does not always need to happen inside a lecture hall. Apprenticeships, alternative qualifications and work-based routes can sometimes offer a better return, depending on the person and the path.